Working Paper: NBER ID: w30499
Authors: Robert A. Pollak
Abstract: The theoretical literature on bargaining ignores altruism and assumes that everyone is an egoist. Because the importance of altruism in the family is widely recognized, the egoism assumption is especially problematic in the economics of the family. This paper shows that incorporating altruism into cooperative bargaining models shrinks the set potential cooperative bargaining solutions. The analysis depends on the implications of altruism for Pareto efficiency and the implications of Pareto efficiency for potential cooperative bargaining solutions. The analysis here applies not only to Nash bargaining but to all cooperative bargaining models. For noncooperative bargaining, the analysis implies that any solution that lies outside the shrunken set of potential cooperative bargaining solutions is not Pareto efficient.
Keywords: Altruism; Bargaining; Family Economics; Pareto Efficiency
JEL Codes: C7; C72; C78
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Altruism (D64) | Reduced set of potential cooperative bargaining solutions (C71) |
| Reduced set of potential cooperative bargaining solutions (C71) | Pareto efficiency (D61) |
| Altruism (D64) | More constrained set of Pareto efficient allocations (D61) |
| Altruism (D64) | Infeasible allocations previously considered viable under egoism (D61) |